With an annual revenue for 2018 of more than $100 billion, Huawei is one of the fastest growing consumer electronics manufacturers. Huawei primarily competes in one of the toughest markets out there: the smartphone market. With business analysis tools like SWOT analysis, we can gain powerful insight into the tech giant’s current standings and future potential. That’s exactly what we’ll do today, by identifying the individual Strengths, Weaknesses, Opportunities, and Threats affecting this dynamic organization, as a follow-up to our recent PESTLE analysis of Huawei.
One of Huawei’s biggest strengths is its extremely competitive pricing. For several years, the smartphone market was dominated by luxury brands such as Samsung and Apple, with little space for cheaper alternatives to compete. However, the prominence of smartphones has skyrocketed over the last 10 years, and that’s lead to a huge demand for budget-friendly devices. Huawei isn’t the cheapest smartphone manufacturer on the market, but it’s significantly cheaper than those luxury competitors we mentioned above.
High quality products
Despite its extremely reasonable prices, Huawei products are generally considered to be of relatively high quality. While their devices might not compete with names such as Samsung and Apple in terms of quality, they appear extremely well-made when compared to other budget-friendly smartphone brands. Many of Huawei’s smartphones are rated four stars and above on major retailing sites such as Amazon, which is a true testament to their quality.
Lack of capital
As a company, Huawei is mostly stripped for cash. Comparing to Apple — which is the world’s largest company by market capitalization (almost a trillion dollars) — Huawei is worth peanuts. Relating to this, the Huawei organization itself has very little capital behind it. This means they need to be extremely careful in planning all of their business moves. More importantly, it leaves little money to invest in marketing or branding, which would be an essential next step for Huawei to become a top-tier brand in the eyes of consumers.
Perhaps as a result of the lack of capital mentioned above, Huawei does not have a particularly strong brand. While appreciation for budget smartphone manufacturers such as Huawei is indeed growing, they have long been viewed as plainly inferior choices. In the case of Huawei, this isn’t helped by their lack of marketing efforts. Admittedly, Huawei’s brand is stronger in some regions than in others: the brand is much stronger in the European Union than in the United States, for example. It’s also worth mentioning that Huawei’s weak brand is partially caused by the prominent Western belief that Chinese products are somehow inferior to their alternatives; this belief is especially prominent in the United States.
5G is the next generation of mobile communications technology. As it turns out, Huawei has been quick to innovate, having designed and built 5G-friendly mobile modems even before major chipset manufacturers such as Intel. If Huawei is quick to ride the 5G train, they may be able to cement themselves as a luxury brand by offering technology unavailable even to top-tier brands such as Apple and Samsung. Huawei have even offered to sell their 5G modems to Apple, which could net them a large windfall. Naturally, this would come with all the tradeoffs of selling technology a major competitor.
Indian and US markets
Oftentimes, weaknesses can also be opportunities. Above, we mentioned that Huawei has a poor brand perception in the United States. As you’d expect, this means that Huawei has little penetration in the American market. The same is true for the Indian market. This means that both India and the US represent untapped revenue sources. If Huawei were able to develop a powerful strategy to enter these two markets, they could see a huge increase in their total revenue figures, given the number of potential customers.
Brick and mortar stores
Bricks and mortar stores are one of the reasons that brands such as Samsung and Apple stand a tier above all others. The luxury, boutique feel of a dedicated Samsung or Apple store not only provides potential customers with yet another way to purchase their devices, but also improves brand perception on a subconscious level. By opening their own physical locations across the world, Huawei would be able to improve its marketing and sales numbers simultaneously.
One of Huawei’s biggest threats is the smartphone market itself. The consumer technology industry is fiercely competitive across the board, and that’s especially true for the smartphone market. Not only does Huawei have to deal with competition on behalf of major brands such as Samsung and Apple (who both possess significant amounts more capital), but it also has to deal with the threat of new entrants. Even if top-tier brands don’t pursue the development of their own budget-friendly devices, a new competitor could join the market at any time and wipe away a portion of Huawei’s market share with just one technological advancement.
Rising labor and material costs
A less severe threat for Huawei is the rising labor and material costs. Manufacturing smartphones is relatively labor intensive (although some parts of the process are automated), so the slow but sure rise in Chinese labor costs is gradually increasing Huawei’s overhead. The same is true for materials, which are progressively more expensive simply due to increasing demand. Together, these factors will force Huawei to increase the prices of their devices, or suffer a reduction in profit margins.
SWOT Analysis of Huawei: Final Thoughts
Huawei has done an excellent job of entering one of the toughest markets there is: the smartphone market. With low cost, high-quality products, it shouldn’t be too difficult for Huawei to thrive, even in tough conditions. What’s more, Huawei has significant opportunity to grow its business, by entering and dominating new markets (including technological ones like 5G and geographic ones like India or the US) and improving its brand perception, perhaps through the use of brick and mortar stores. With that said, Huawei needs to keep a close eye on its competition and ensure it has plans in place to manage growing labor and material costs.
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